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Oilfield Services & the R&D Credit

By Shannon McCain, CPA, Tax Partner

With $60 oil, oilfield services are finally seeing light at the end of the tunnel.  And with private equity firms coming off the tailspin of the industry downturn, they have aimed their sights on the oilfield services (OFS) sector as a concentration area for their funding.  In what was once a sector defined by hard asset investments, this leaner and more dynamic sector is coming into their new persona—moving towards digitalization and emerging technologies that advance E&P efficiency.

It is time to take a serious look at the R&D credit if your OFS company is making this transition and you are looking at ways to alleviate some of the financial burden. Additionally, where project funds can be maximized, and private equity firm return can be prioritized.

I am sure you have heard of the R&D Tax Credit as it has been around since 1981.  The goal of the credit has been to stimulate growth by providing incentives to companies that incur expenses while engaging in research and development activities.  With the current transformation in the industry, now more than ever is a time to capitalize on this incentive.  At HoganTaylor we want to make sure you have the resources to do so.

Listed below are just some examples in each stage of the production lifecycle where your OFS company may be a contributing factor of the industry’s revolutionization.

R&D Tax Credit Qualifying Activities

Upstream

  • Updated seismic imaging technology
  • Improvement of reservoir simulation models
  • Data analysis advancements
  • Development of new fields that are new to a specific operator
  • Drilling techniques, processes, or completion designs
  • Techniques in Enhanced Oil Recovery (EOR)

Midstream

  • Design, development and construction of facilities and pipelines
  • SCADA security
  • Lease Automatic Custody Transfer (LACT) system design and installation
  • Metering, leak detection and pipeline corrosion systems
  • Throughput performance improvement

Downstream

  • Processing facility design and construction (including improvements required by regulatory standards and laws)
  • Alternative processing techniques
  • Facility equipment and technology
  • Enhanced or new products
  • Safety monitory features
  • Process automation

Onsite Oil Field Services

  • Implementing, Development of Techniques or Processes related to recovery process
  • Review of equipment for site specific usage
  • Developing new tooling for downhole applications

Oilfield Equipment Suppliers

  • New processes to meet customer specifications
  • Developing customized components to site specific constraints

Is your company currently engaging in or planning to engage in any of the above activities or any other investment that makes your processes or products better or more efficient?  If so, call any member of the HoganTaylor Energy team to see how they can help identify the potential the R&D Tax Credit can have for your company.